Aug 18/05 - On Brazil's putrid corruption mess

PMBComment: by comparison to what is cooking (or is it baking?) in Venezuela, the PT's crime seem petty thievery...what a difference oil and a tight grip on all state institutions makes! Even 2.1 million barrels of oil exports per day - a pitiful amount compared to the true productive potential of Venezuela - goes a long way when multiplied by $53/barrel, and even more when spent liberally with no checks, no balances and no shame. What’s more, the chavistas and their acolytes and accomplices do not need to hide $100,000 in their underwear, they simply wire their spoils to their favorite US bank and that is that!

It will be interesting to watch if the investigators, or the press, turn their attention to the corrupt international activities of Dirceu and Marco Aurelio Garcia. One can only guess that the plot will thicken behind giant Venezuelan public work and oil projects awarded without bidding to Brazilian companies and Venezuela's purchase of millions of tons of Brazilian foodstuff. And, just maybe, we will also find out what former Brazilian OAS Ambassador Pecly Moreira was instructed to observe - by these same two characters - when he managed to see nothing wrong whatsoever with last year's recall referendum in Venezuela. PMB

The Economist

The fall of the Workers' Party

Aug 18th 2005
From The Economist print edition

As polls suggest for the first time that Brazil's President Lula da Silva might lose next year's election over a big corruption scandal, his Workers' Party—Latin America's largest left-wing party—risks disintegration

THE fortunes of Luiz Inácio Lula da Silva, Brazil's president, could yet recover from the corruption scandal which has paralysed his government for the past three months. But his Workers' Party (PT) will never be the same again. An internal election next month is likely to see the party turn further left or split—or both. In any event, it seems set for a drubbing from the voters at a general election next year. The PT's move to the centre in the 1990s stirred optimism about Brazil's economic prospects. It is now in jeopardy.

The scandal turns on allegations that PT officials used illicit cash to finance the party's campaigns and to buy the loyalty of congressional allies. They deny this; no prosecutions have yet been brought. But the affair has already toppled José Dirceu, the president's chief adviser, along with the PT's entire leadership. It has also implicated a score of congressional leaders from the PT and allied parties, along with some opposition figures.

On August 11th, Duda Mendonça, a publicist who orchestrated Lula's 2002 presidential campaign, admitted that he was paid through offshore accounts—a crime if the PT authorised the transaction. For the first time an opinion poll has predicted that Lula would lose next year's presidential election to José Serra, the man he beat in 2002 and who is now mayor of São Paulo. Even so, Lula is not finished yet. He is more popular than his party. There is no proof that he endorsed illegal payments. The economy is set to grow strongly next year. Opposition parties downplay talk of impeachment.

But for the PT, which claimed a monopoly on ethical politics in Brazil, the scandal has precipitated an identity crisis. The party's origins lie in mass strikes which helped to end Brazil's 1964-85 dictatorship. Its election victory in 2002 was widely seen as a sign that Brazil had completed its transition to democracy. The PT's conduct in office appeared to confirm that party and country were maturing together. Like Britain's Tony Blair, and unlike traditional Latin American leftists, Lula's government has made economic stability the foundation of his quest for social justice.

Lula's victory and the pragmatism that followed were made possible by a transformation of the party engineered a decade ago by Mr Dirceu and his allies (known as the "majority camp"). This turned a party of militants—a mixture of Catholic activists, left-wing intellectuals and union leaders—into a mass party of 840,000 individual members. With that came a change in ideology. In its early days the PT knew that it was against capitalism and "bourgeois" democracy, but not what it was for. "We were born saying No," said a former party leader last year. By 2002, Lula stood for moderate social reform.

But the changes opened up fault lines which the scandal has widened. According to his critics, Mr Dirceu, a former communist who trained as a guerrilla in Cuba, never lost his authoritarian habits. In the state of São Paulo, the PT's base, Mr Dirceu's disciples "profiled the members in every municipality", assessing their loyalties and "intimidating those who were not in his circle", says Rudá Ricci, a PT activist turned sociologist.

Others criticise Mr Dirceu's pragmatism. The drive to "win the election at all costs" and ally with parties of the right "dismantled the ethical and political patrimony of the PT", claims Ivan Valente, one of 15 left-wing congressmen who this month formed a "free PT" faction, which rejects the party leadership. The party's former treasurer, Delúbio Soares, became known as the "suitcase man", says Mr Ricci. Mr Dirceu denies knowing of illicit financing and insists that he democratised the party, but by most accounts he wielded near-absolute power over it.

The scandals have triggered a three-way struggle for the party's soul. The left wants to restore its former ideology and structure, as well as its ethics. Mr Dirceu's group is fighting to keep control. The party's new president, Tarso Genro, formerly the education minister, is caught in the middle. The PT is due to elect new leaders on September 18th; after the end of that month, prospective candidates in the 2006 elections can no longer switch parties. By then the PT's new shape will be clearer.

Even if Lula wins the election, his party may lose many congressional seats, robbing it of the confidence to promote unpopular reforms

Mr Genro is the candidate of the "majority camp" but has criticised the government's economic policy. His efforts to punish tainted party leaders have been blocked by Mr Dirceu. Candidates from several leftist factions will challenge Mr Genro. They want an end to congressional alliances with centre-right parties and the sacking of Antonio Palocci, the orthodox finance minister, neither of which Lula can afford to concede. Much of the "Free PT" could end up leaving the party.

In theory, the majority that remains would form a more cohesive grouping, more supportive of Mr Palocci's moderate economic policies. Most PT congressmen think these are correct, says José Eduardo Cardozo, who is one of them. If miscreants are punished, the PT "will emerge bleeding but whole", he says.

Maybe. But it will have trouble finding allies and raising money for next year's election. Even if Lula were to win, most analysts expect the PT to lose up to 40 of its 90 seats in the 513-seat lower house. Such setbacks might rob the party of the confidence to promote unpopular reforms. "The majority camp had a clear political project to incorporate market-friendly reforms into a leftist platform," says Christopher Garman of Eurasia Group, a consultancy. Now "all these guys have fallen." The new team will worry more about defending the PT's electoral base, which is urban, unionised and resistant to reform. Brazil will have to wait for a Workers' Party that is both pragmatic and clean.